Retail sales, Shanghai and don’t bet against the ‘YaYo Yellen’ effect

By Shawn Langlois

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That’s it. We’re cooked. Show’s over. Someone just drowned the dog and shot the pony. Forget about retirement, the top’s here and we can bid adieu to the salad days of 2013.

One triple-digit loss on top of some muddy market days, and the noise is reaching CenturyLink Field levels. It’s only going to get louder — and more panicky, too — if bank earnings and retail-sales numbers fail to inspire (jury’s out so far there). Especially considering U.S. markets aren’t showing signs of a huge recovery this morning.

Stop. Breathe. Focus.

Whether it be Shanghai, consolidation or the emergence of high-beta stocks (more on those below), the bull, for better or worse, is still well-armed with reasons to believe the recent market wavering is nothing but a short-term blip — a mostly harmless reminder to not get too cocky about where we’re headed.

The Fly from the iBankCoin blog, for one, isn’t fretting the 179-point hiccup. He says a 3% drop for the rest of the month is the worst-case scenario.

“Bear in mind, if we go down in January, we’re gonna forklift in February. There’s no escaping this brazen bull market,” the colorful blogger wrote. “Don’t bet against The Beard, and it’s probably not a good idea to bet against ‘YaYo Yellen’ … she needs to make her mark immediately – else be considered a mistake.”

The economy: The star of the show today is the U.S. retail sales number, which rose 0.2%, better than the 0.1% decline that was expected. The data offered some proof of companies getting good foot traffic in December, with Americans stocking up on food, drinks, clothes and shopped more online. Of course, retailers were were forced into some heavy discounting. A pair of Federal Reserve bank presidents, Charles Plosser of Philadelphia and Richard Fisher of Dallas, are also expected to offer clues on the central bank’s next move. Expect none of that “namby-pamby stuff” from these guys cautioned Stephen Guilfoyle over at Sarge986.com.

The monthly small-business survey by the National Federation of Independent Business, showed a rise of 1.4 points to 93.9 in December. Data also showed U.S. import prices for December were flat.

Also, U.S. House and Senate negotiators hammered out a $1 trillion spending deal — a number in line with the agreement reached in December — that will fund the government through the 2014 budget year.

The chart of the day: Shanghai
/quotes/zigman/1859015/realtimeCN:SHCOMP stocks are finally shaping up for a rebound (that index rose 0.9% on Tuesday), according to Charlie Bilello, director of research at Pension Partners. He tweeted this chart of how this market, uninspired by the raging bull in the U.S., has been getting hammered for four years. Right about now, it’s getting “long in the tooth,” perhaps even starting to behave like the new Japan, Bilello said.

The call of the day: The boss at Richard Bernstein Advisors, like the fellas at Pension Partners, believes there’s more upside to come for U.S. markets. Bernstein said we’re not in a bubble because high-beta stocks — those most sensitive to overall market movement — aren’t richly valued. In fact, quite the opposite. “It seems very unrealistic that high-beta stocks could be selling at historically conservative valuations if there really was an equity bubble underway,” he wrote.

Bernstein also explained the rally is about to be more driven by earnings than the P/E-driven rally we’ve grown accustomed to. “While there is no doubt that investors’ fears regarding equities after the 2008 bear market have started to subside, this is a normal occurrence for a mid-cycle environment,” he wrote. “The euphoria that is typically present at market peaks has yet to occur.”

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.